A wave of construction in 2023 put the brakes on apartment-sector rental growth, and further development is expected to do the same in the short term in 2024 even though demand is strong, according to CBRE's fourth-quarter U.S. multifamily report.

Multifamily completions totaled 140,900 units in Q4, bringing the total for the year to 416,500, the highest since CBRE began tracking the market in 1996. Fewer construction starts in recent quarters will slow deliveries by 2025, but in 2024 they're expected to remain strong.

This year, CBRE expects 440,000 multifamily units to deliver of the 900,000 under construction nationwide. The surge in new supply will squeeze some landlords, especially as property management costs rise.

The recent surge in development meant that average rent fell 1.2% quarter-over-quarter in Q4 2023, though rents edged up 0.4% from Q4 2022.

However, most of the impact of dropping rents is felt toward the high end of the market, reports The Wall Street Journal, citing Yardi Matrix data. Rents at middle- and lower-tier apartments rose roughly 2% year-over-year in December, according to Yardi, with rents at higher-end properties down about 1%.

“Everyone came here to build,” Carly Guimaraes, an Austin real estate agent told the WSJ. “Now that supply is coming to fruition, and it’s created a surplus in the luxury market.”

Delinquencies for apartment-associated CMBS loans could hit $1.3B this year, which would be even more than the losses seen during the height of the pandemic, Fitch Ratings reports.